How Can a Foreign Investor Acquire a Stake in a French Company?

A foreign investor can acquire a stake in a French company in several ways, including by subscribing to a share capital increase.

The investor may be an individual, a foreign company, a holding company or an institutional investor established within or outside the European Union.

Where the investment is made through a share capital increase, the French company issues new shares to the investor in exchange for a cash contribution.

The transaction requires the appropriate corporate approvals, identification of the investor and, where applicable, its ultimate beneficial owners. The subscription funds must then be paid and deposited in accordance with the rules applicable to the share capital increase.

The funds may be deposited with a French notary, including where they are transferred directly from a bank account outside France.

What Are the Main Ways for a Foreign Investor to Invest in a French Company?

Two main mechanisms should be distinguished.

The investor may purchase existing shares from one or more shareholders. This is a share transfer: the purchase price is paid to the selling shareholder and does not, in itself, provide new funding to the company.

Alternatively, the French company may carry out a share capital increase.

New shares are then issued and subscribed for by the foreign investor, which contributes additional funds to the company.

A share capital increase can therefore achieve two objectives simultaneously:

• bring the foreign investor into the company;
• and provide new financing to the French company.

The appropriate structure will depend on the commercial objectives of the parties and the terms of the proposed investment.

Where the investment is structured through the issuance of new shares, see our guide to share capital increases in France involving a foreign investor.

Can a Foreign Investor Subscribe Directly to a Share Capital Increase?

Yes.

As a general principle, an investor is not prevented from subscribing to the share capital of a French company simply because of its nationality or place of residence.

The subscriber may, for example, be:

• an individual residing outside France;
• a foreign entrepreneur;
• a foreign company;
• an international holding company;
• a fund or other institutional investor.

It is therefore generally unnecessary to establish an intermediary French company solely for the purpose of making the investment.

Specific regulations may nevertheless apply to certain foreign investments in France.

If the new investor is a corporate entity, specific documentation will be required. See Can a foreign company subscribe to a share capital increase of a French company?

What Corporate Decisions Are Required?

The investment must be structured in accordance with the rules applicable to the French company and its articles of association.

For a share capital increase, the shareholders or other competent corporate body will generally determine matters such as:

• the amount of the share capital increase;
• the number of new shares to be issued;
• their nominal value;
• any applicable share premium;
• the subscription terms;
• and the identity of the subscribers or the rules governing their participation.

Depending on the company’s legal form and articles of association, additional rules may apply concerning pre-emption rights, shareholder approval procedures or the powers of the various corporate bodies.

Where the French notary acts solely as depositary of the subscription funds, the notary does not necessarily prepare the corporate documentation for the transaction. This documentation may be prepared by the company’s usual legal advisers.

What Documents Are Required from a Foreign Investor?

The documentation must allow the foreign investor to be clearly identified.

For an individual investor, a valid identification document and the information required to complete the applicable checks will generally be requested.

Where the investor is a foreign company, the required documentation may include:

• a recent extract from the relevant foreign company register;
• its articles of association or equivalent constitutional documents;
• identification of its legal representative;
• evidence of the authority of the person acting in connection with the investment;
• an ownership structure chart;
• and documents identifying its ultimate beneficial owners.

The precise documentation required will depend on the investor’s jurisdiction, corporate structure and the characteristics of the transaction.

Do Foreign Corporate Documents Need to Be Translated?

A translation may be required where foreign documents cannot be satisfactorily reviewed in their original language.

Depending on the circumstances, a certified translation may be necessary.

Certain documents may also require an apostille, legalisation or another authentication formality depending on their country of origin and intended use.

It is generally advisable to submit the available documents for preliminary review before arranging translations, apostilles or legalisation, so that the exact requirements can first be identified.

How Does the Foreign Investor Transfer the Subscription Funds?

The investor does not necessarily need a French bank account. For more information, see subscription funds are transferred from abroad.

Subject to prior review of the file, the subscription funds may be transferred directly from a bank account outside France to the account specified by the depositary.

The payment must be clearly identifiable and capable of being matched with the investor and the corresponding subscription.

The funds must therefore not be transferred before payment instructions have been provided by the depositary.

If the payment is to be made from an account that is not held in the subscriber’s name, this should be disclosed before the transfer is initiated.

Does the Source of the Investment Funds Have to Be Documented?

Depending on the circumstances, supporting documentation concerning the source of the investment funds may be required.

The French notary must carry out the required checks concerning the persons and funds involved in the transaction.

Depending on the investor, relevant documentation may include:

• bank statements;
• documents concerning an individual investor’s assets or income;
• corporate accounts or financial statements;
• evidence of available corporate cash reserves;
• financing documentation;
• or documents relating to the sale of an asset.

The documentation required will depend on factors such as the investor’s profile, the amount invested, the country from which the funds originate and the overall characteristics of the transaction.

Does a Foreign Investment in France Require Government Approval?

Not in every case.

Most ordinary investments are not subject to prior authorisation merely because the investor is foreign.

France does, however, operate a foreign investment screening regime covering certain investments in companies engaged in sensitive or strategic activities.

Depending on the investor, the activities of the French company and the level of ownership or control acquired, prior authorisation may be required.

This issue is separate from the deposit of the subscription funds.

The fact that a French notary can receive the funds does not constitute approval of the investment under any foreign investment screening rules that may apply.

Can the Investor’s Home Country Restrict the Transfer to France?

Yes.

The French rules governing the investment must be distinguished from the rules applicable in the country from which the capital is being transferred.

Some jurisdictions impose restrictions on:

• investments made outside the country;
• international transfers;
• conversion of the local currency;
• or movements of capital abroad.

The investor must therefore ensure that the proposed transfer to France complies with the rules applicable in the country of origin.

The ability to deposit funds with a French notary does not circumvent foreign exchange or capital transfer restrictions imposed by another jurisdiction.

How Can the Subscription Funds Be Deposited with a French Notary?

The procedure can generally be organised remotely.

The French company first provides the notary with the documentation relating to the share capital increase together with the documents concerning the foreign investor.

The file is reviewed and any additional documentation required is requested.

Once the file has been accepted, the notary provides the relevant payment instructions.

The foreign investor can then transfer the subscription funds from France or abroad.

After the funds have been received and the required checks completed, the French notary issues the depositary’s certificate, allowing the company to proceed with the definitive completion of the share capital increase.

Foreign Investment in a French Company with Chassaint & Cerclé Notaires

Chassaint & Cerclé Notaires, a French notary office based in Paris, assists French companies with the deposit of funds for share capital increases involving foreign investors.

The office can receive subscription funds from:

• individuals established outside France;
• foreign companies;
• international holding companies;
• and other non-resident investors.

The file can be submitted remotely for review before any transfer is made.

Once the file has been approved, payment instructions are provided to the investor. Subject to the circumstances of the transaction, the subscription funds may be transferred directly from a bank account outside France.

After receipt of the funds, the depositary’s certificate can be issued within 24 business hours, provided that the file is complete and the required checks have been completed.

For further information and to submit your share capital increase file, please visit our dedicated share capital increase page, click here.